Hungary’s economy heavily depends on EU funds, study finds

Christian Keszthelyi

Thursday, March 30, 2017, 13:13

Although the Hungarian economy grew by 4.6% in the 2006-2015 period, without EU funds sent to Hungary in the framework of the 2007-2013 funding cycle, GDP growth would have been only 1.8%, says a study by KPMG and GKI. Meanwhile, the government appears to be launching a national consultation to, as it puts it, “stop Brussels.”

The Prime Minister’s Office published the results of the study, according to Hungarian online news portal napi.hu. Citing the study, the Hungarian daily reports that despite the approximately HUF 14 trillion sent to Hungary in funding, the competitiveness of the country deteriorated, and manpower has been leaving the country.

The study shows that residential consumption dropped by 5.3% in the investigated period, and would have dropped by 11% without EU funding. As far as investments are concerned, according to the study, a slight 2.8% growth was observed, while without EU funding a devastating 31.3% decrease would have hit the sector, napi.hu reports.

Employment grew by 280,000 in the period, while without EU funding only approximately 105,000 jobs’ growth could have been reached, napi.hu finds, based on data from the study.

Despite EU funds, competitiveness drops

In spite of the formidable amount of funds the EU has allotted to Hungary, the country’s competitiveness has been on a steep fall, napi.hu reports. In 2006, Hungary was ranked on the World Economic Forum’s competitiveness list in the first or second place of the seventh group, while in 2016 the country was placed last in group ten.

The study also notes that, although money has been spent in both the health care and education sectors, such investments were so fragmented and lacking in concept that it basically had no structural effect.

The study also found that in many cases, the investments carried out were not motivated by real market needs, but the possibilities that the description of the funding made available, according to napi.hu.

While one of the aims of EU funding is to keep manpower, and create jobs, by the end of the cycle the brain drain has become so marked that nowadays this is one of the biggest challenges the country is facing, the napi.hu report notes.

According to the study, both the Gyurcsány government — at the beginning of the cycle — and the Orbán government — at the end of the cycle — can be blamed for the failures of the cycle, the daily noted.

And napi.hu also argues that the study reveals that Hungary’s GDP exhibited the slowest growth among the Visegrad Four countries, as well as lagging behind the region, while its dependence on EU funds is growing.

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